Treasury yields are little changed as collapse of Iran talks clouds inflation outlook

Treasury yields were little changed on Monday as the breakdown of negotiations between Iran and the U.S. clouded the inflation outlook once again.

The yield on the 10-year U.S. Treasury note — the benchmark for government borrowing — was flat at 4.317%.

The 2-year Treasury note yield, which is more sensitive to short-term Federal Reserve interest rate decisions, fell less than 1 basis point to 3.795%. The longer-dated 30-year Treasury note yield was also down less than a basis point at 4.912%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

Investors are reacting to a U.S. blockade of the Strait of Hormuz after talks between Washington and Tehran at the weekend failed to produce an agreement to end the Middle East conflict.

The blockade of the key passageway, which President Donald Trump announced plans for on Sunday, took effect Monday.

Yields are also digesting Friday's inflation print, which showed core prices rising less than feared, despite the surge in energy prices since the start of the Iran war.

The most recent U.S. CPI reading came in at its highest level in 2 years, stoking concerns that the energy price shock could spread to other goods and services.

"President Trump won't be best pleased with today's inflation print and given his heavy criticism of Joe Biden's handling of inflation during his tenure as President, we can expect him to be rather sensitive to such a significant swing," said Richard Carter, head of fixed interest research at Quilter Cheviot.

"Trump will be pinning his hopes on the ceasefire holding, as if the peace talks are not productive then there's a real risk of a further spike."

Other areas revealed signs of weakness in the U.S. economy, however. On Monday, existing home sales in March came in worse than expected, dropping to their lowest level since June.